Staff utilisation. What is it and why is it important?

Staff utilisation. What is it and why is it important?

By Pam Phillips

Staff utilisation is one of the most important metrics for an agency to track. In this blog I explain what staff utilisation is as well as sharing some tips on how you can improve it.

What is staff utilisation?

There are only so many hours in the day and, no matter how efficient your agency is, you will want to make sure that you are using those hours wisely. This means working on those activities which are the most profitable for your business.

The utilisation rate of your agency is basically a measure of how much of your total time is spent delivering client work.

How do you calculate staff utilisation?

The staff utilisation rate is calculated by taking the number of billable hours worked and dividing by the total available hours, expressed as a percentage.

Billable hours are those which are spent working on activities that are directly attributable to a fee-earning project.

Don’t aim for 100% billable work as there will always be non-billable hours. For example, as well as billable work you will also need to spend time on activities like sales and marketing, training and development, strategy and managing your finances.

What does your staff utilisation rate tell you?

Your utilisation rate will give you a huge amount of insight into your business. For example it will:

  • Help you understand why your profits are what they are and what you can do to improve them.
  • Help uncover inefficiencies in your agency
  • Let you know if your staff are over-worked and you may need to start hiring
  • Let you know if you don’t have enough work to support the staff levels you have.

How can you use staff utilisation rates to improve your agency?

Your utilisation rate will tell you how effective your agency is and also give you a clear idea of things you can do to improve profits.

If your utilisation rate is too high it will show that you may need to look at growing your team so your people are not overworked and you have capacity to take on more work as your agency grows.

If your rate is too low it will show you that you need to focus on bringing in new business as well as reviewing processes to ensure any non-billable activities are efficient as possible.

Here are some ways you can use your utilisation rates to improve your agency.

1. Share best practice across teams

By tracking utilisation by team you can learn which teams are more profitable than others and use this to dig deeper to understand why this is. It may be that they do something a particular way that could be shared with other teams as best practice and so raise the bar across your whole agency.

2. Resource planning

Find out where you have spare capacity or not enough capacity and redistribute people accordingly. It can also help ensure the right people are doing the right work. You don’t want a director doing the work that a junior associate could be doing.

3. Manage scope creep

To see which projects are on track to meet budget and if they are over, find out why. Over budget, projects are often due to scope creep which, if it goes unspotted, will hit profits. If you are tracking your time and utilisation you can spot scope-creep early and renegotiate fees before a project over-runs.

4. Create better proposals.

You will have more insight into how much time certain projects really take and what level of staffing is needed so you can use that the next time you are preparing a similar proposal.

5. Target more profitable services

By knowing which of your services and are more profitable, you can make sure you focus on growing the right part of your business.

6. To set your billable rates

Knowing your utilsation rate means you can factor it into your billable rates (rather than assuming 100% of your hours are potentially billable when you now know they are not!)

How to improve your utilisation rate

Measure it

To improve it you need to first know what it is. There are some great tools for tracking time. We recommend Harvest and have lots of experience rolling it out for clients so if you want to get up and running with it quickly, get in touch and we can help.

Report it

Share reports with your team and hold them accountable for the utilisation rates of their team. Discuss these reports in your regular meetings and find out where there are issues and what changes can be made.

Get in touch

If you want to start tracking utilisation in your agency, get in touch and we can help you get started.

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